There is no question that the Canadian economy has lagged due to labour and skills shortages. According to a recent report, the economy has lost out on $13 billion as a result of these shortages. That's a huge blow, and it's one that businesses can't afford to take lightly. So, what exactly is causing labour shortages? And what can businesses do to mitigate the impact? Let's take a closer look.

 

 

Examining the Causes of Labour Shortages in Canada 

There are a number of factors that have contributed to the current labour and skills shortages in Canada. Firstly, the country's population is aging and, as such, there are fewer people of working age relative to the number of retirees. 33% of recently retired Canadians say they retired earlier than planned due to the Corona Virus pandemic. This demographic shift has put pressure on the remaining workforce to shoulder a larger burden. Manufacturing and construction are two industries that have been hit particularly hard due to the aging population.

Secondly, Canada has seen an influx of immigrants in recent years. Not all of these immigrants have the skills or credentials necessary to fill high-demand jobs. The unemployment rate for immigrants who had arrived in Canada within the past five years was at 7.6% as of August 2022. As a result, employers are struggling to find immigrant workers with the right mix of skills and experience. 

Finally, another factor that has exacerbated the labour shortage issue is that many workers are leaving their jobs for greener pastures in other industries or countries. Last year over 200,000 Canadians quit their jobs to head back to school for retraining and upskilling. According to Stats Canada's August Labour Survey, 12% of people surveyed said they plan to leave their job within the next 12 months. This mix of factors has tightened the labour market, making it harder for businesses to find qualified workers.

 

 

Impacts of Labour and Skills Shortages on Businesses and the Economy

The labour shortages are resulting in a wide range of negative impacts on all sectors. The biggest of which are delivery delays, increased costs, and negative mental health impacts on current employees. The latter impact is particularly worrisome because it tends to compound labour shortages. Work-related stress and poor mental health have been cited as major reasons for absenteeism, occupational disability, and early retirement.

 

According to the Canadian Manufacturers and Exporters’ (CME) annual labour survey of 563 manufacturers in 17 industries across the country found that almost two-thirds have lost or turned down contracts and experienced production delays due to a lack of workers. Many companies have put off plans to expand and are pausing efforts to innovate production. Not only is this bad for business but it's detrimental to the communities that rely on these companies for their livelihood.

 

Canadian agricultural businesses have been feeling the impact of labour shortages with nearly three-quarters (74%) of agri-business owners working more hours to make up for the lack of staff, according to a new report by the Canadian Federation of Independent Business. Nearly half (48%) of agri-businesses have had to turn down sales or contracts due to labour shortages, while 41% have had to decrease service offerings.

The impacts of labour and skills shortages are far-reaching. For businesses, shortages often lead to higher wage costs as businesses compete for scarce talent. Wage inflation then puts pressure on prices, which results in inflationary pressures throughout the economy. In extreme cases, businesses may be forced to close their doors due to an inability to find enough workers to keep their operations running smoothly. All told, it's clear that labour and skills shortages can have a significant negative impact on businesses and the economy as a whole.

 

 

What Can Be Done?

Fortunately, there are steps that businesses can take to mitigate the impact of labour and skills shortages. One way is by providing training and development opportunities for existing employees so that they can acquire new skill sets or upgrade their existing ones. This method is typically more cost-effective and will also bring the added benefit of encouraging loyalty from your current employees. If the idea of spending money on training brings worry that the employee will simply leave once the training is complete, consider implementing a contract where they must stay with your company for a certain amount of time or repay the training costs.

Businesses can address shortages by looking for ways to adopt automation to streamline tasks and use technology to supplement the workforce. Many businesses have accelerated plans to adopt automation technologies like robots and smarter software. Such adoption is happening across industries like manufacturing, the service industry, and administrative work. Whether you use pre-made software or have a custom program made for your business, investing in technology is a way to increase profits and reduce the workload for your current staff.

Finally, business owners can look outside traditional sources to search for candidates. For technical roles, local universities have programs to hire students while they complete their degree. For the skilled trades, businesses can sign up to host apprenticeship programs. The Canadian government offers grants and wage subsidies for hiring Indigenous peoples, persons with disabilities, new Canadians and women. For non-skilled work, companies can rely on temp labour services that have thousands of available workers. Temp labour can expedite the hiring process, getting businesses the help they need immediately.

 

 

What is the Canadian Government Doing?

A step the Canadian Government has made towards easing labour shortages is shifting its immigration focus to fast-track entry for skilled workers. Sean Fraser, Minister of Immigration, Refugees and Citizenship, announced the implementation of the National Occupational Classification (NOC) 2021 for immigration programs managed under the Express Entry system. Using the new NOC categories will allow Canada to bring in global talent in high-demand sectors like health care, construction, and transportation. Another step the government has made is lifting work restrictions on international students. This change allows students to work full-time during the school year, as well as during scheduled breaks like the summer and winter holidays.

 

Take Away

We can all agree that labour and skills shortages are having a negative impact on businesses and the Canadian economy as a whole.  By utilizing the tips we outlined above, your business can mitigate labour shortages and stay competitive in today's ever-changing marketplace.